October 19, 2025 • 12 mins
Annual inflation has risen to a 15-month high of 3%.
Economists had been expecting inflation to reach or surpass the 3% upper limit of the Reserve Bank's target band.
The central bank's expected to look past this current spike when it reviews the OCR next month.
New Zealand Herald Business Editor-at-large Liam Dann told Kerre Woodham that, “this this drip feeding of the rate cuts means that everybody just waits.”
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Speaker 1 (00:09):
You're listening to a podcast from News Talk sed be
follow this and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
As you heard in our news, annual inflation has arisen
to a fifteen month high of three percent. Economists had
been expecting inflation to reach that also pass the three
percent upper limit of the Reserve Banks target band. The
Central Banks expected to look past this current spike when
it reviews the ocr next month. It reckons the economy
(00:37):
has been weak enough to start pushing inflation down. New
Zealand Herald Business Editor at large Liam Dan joins me, Now,
good morning, some late breaking news coming into your phone.
Speaker 3 (00:50):
Your phone ping shouldn't be get near that. It shouldn't
be on. It's okay, but I'm reading the latest news
off it because it's all just coming out. Really yeah,
So look bang on. Expectations not great, but that the
big headline has got to be power prices. So in
terms of driving up inflation, the worst power prices we've
(01:12):
had in this country since March nineteen eighty nine, the
biggest annual increase sorry yeah, yeah, since March nineteen eighty nine,
when there was some I can't really remember, but there
was a bigger Foteste going through at that time, and
that spiked it. So that is pretty is this the
gas again will be that there's actually just short well
(01:34):
it's not all the wholesale price. It's to do with distribution.
I'm not an expert in this very complicated industry, but
you know, like for example, companies like Genesis, the retailers
have said, look, you know they every five years, retailers
(01:55):
pass on the costs that they've been accumulating from increases
from the lines company. So that that was included in
that quarter, I think. But yeah, there was also you know,
the lakes are full now and wholesale power prices have
come down, but they were spiking earlier in the year
and we all felt it right through winter unfortunately, and
(02:17):
so that that was a big one food where we
got food on. You know, food's been up around four
or five percent so and rates have been high as well.
So you know, if you look at they are things
that you just can't avoid rates, and so people feel it,
and they feel more acutely than the three percent because
(02:41):
some of those other things that are keeping keeping it
sort of pushing down the other way. You know, it
can be anything from international travel to you know the
price of getting an accountant or something like that. You know,
things that services and things that we don't necessarily have
to spend on. So if you're just you know and that,
so that affects people who are spending more of their
(03:03):
income to survive and makes it pretty tough. So you know,
that is all horrible, but it's also already happened. So
it's worth remembering that this is the third quarter. We've
already paid these prices, and there are some positive signs.
As economists mentioned, it's bang on the target. The power
(03:24):
prices won't be going up or anything like that. Again,
rents well not not in this current quarter because you
know you're not going to get the lines companies, the
distribution charges and wholesale prices are down a lot. So
you know, I can't can't promise further out or next winter,
but so that'll be promising. Food prices have already started
(03:46):
to come off. Butter's down. Yeah, yeah, I mean that genuinely.
You know, I see it at the supermarket already, butter
not cheese. I got to say, I've watched these things
very closely, so.
Speaker 2 (03:58):
I know these things.
Speaker 3 (03:59):
But butter prices has definitely started to improve, and so
I think from a big macro economic point of view,
this isn't going to change anything for the Reserve Bank.
So we're still going to get another rate cut, possibly
one after that if things are still really bad.
Speaker 2 (04:18):
You don't think they'll go hard before Christ. I mean,
because this drip feeding of the rate cuts means that
everybody just waits. Yeah, and I've got a lot of
employers who are telling me that they are not going
to invest or grow while they've got the fear of
a left block coming in, which means it's going to
be a self fulfilling prophecy if they don't start growing.
Speaker 3 (04:39):
They have to be careful though, because they have, as
we know, a single mandate. It's this government is brought
in which says only inflation is their only only target.
So previously they could have gone, oh, unemployment's looking bad,
we'll factor that in and do a double but they
do have to look at inflation.
Speaker 2 (04:55):
And the two tier economy.
Speaker 3 (04:56):
Yeah, and I mean, you know, I've argued that I
can see the logic for that, but in terms of
timing it hasn't been fantastic for this government. It's almost
I suggested It's almost an own goal because they could
have moved faster with a dual mandate, quite possibly.
Speaker 2 (05:13):
But I suppose they were so busy trying to fix
everything at once with the night, as you've said, with
the Night of the future, and they're not going to
be thanked for that unless things start to improve in
the short term.
Speaker 3 (05:22):
Yeah, I mean, it wasn't it was. It was an
odd one to prioritize it was that in their tax
So I struggled.
Speaker 2 (05:29):
Struggle struggled with they remember those Well.
Speaker 3 (05:32):
No one's going to remember them at the voting booth
next year, and and and it's unfortunately so yeah, look
it'll I guess this is good news in a way
that it's bang on target. The economists have got it right.
Nobody's going to be panicking. The markets are unmoved, so
we've still got the seeds of the recovery starting starting
(05:55):
to roll. I mean, as you say, it is, it
is a very slow process. If people think the rates
are going to be down lower in February, they hold
off even longer. But I wouldn't. I mean, you know,
there's plenty of economists who are warning that you're not
going to see that much more on the mortgage, you know,
the retail mortgage end.
Speaker 2 (06:16):
There's a bit of there's a bit of riggle room
within the different trading links though, isn't there a little?
Speaker 3 (06:21):
They move pretty fast to keep there one year, two
year and six months about the same. Yeah, I guess
you know, people have held off and to me, what
is keeping people from spending is not it's not that
so much the locking and the rates. It's the still
the fear around jobs. And in the next piece of
ugly economic data that we get is going to be
(06:43):
the unemployment numbers.
Speaker 2 (06:45):
You know, I could have done with your column quite frankly,
well that was really that was the sub editors with
the headline the economy is recovering, Brace yourself. There's bad
news coming Liam Dan, Good on you.
Speaker 3 (06:56):
But there is the point of that, though, is that
I think we've got a recovery happening, and you're going
to get but we're going to have, you know, news
about horrible power prices and things. Today, we're going to
get an ugly unemployment number, they're all historic, and then
we're going to get right before Christmas, we're going to
get a GDP number that could say that we were
back in recession. And that's the way it works. The
(07:18):
headlines come later, and we just don't want to let
them disrail derail us in terms of confidence, because you
have to think about what we're in right now, and
hopefully there are some signs that there are some signs
around consumer spending. Some towns are doing better than others.
I was in christ Church in the weekend, better and
better and better. Although I talked to people in christ Church.
(07:42):
I've got friends who were made redundant, you know, from
tech industry and things. And I've got a family member
who runs a small business working with a large number
of other small businesses at B to B accounting type thing,
and they're saying that they've had the toughest year they
can remember in terms of, you know, their clients. And
so even the cities that are supposedly doing well have
(08:04):
had a tough year. So a stretch to say that,
you know, you don't want to assume that it's all Auckland
and Wellington's blues.
Speaker 2 (08:14):
No. Somebody says too that the white cuttle regional rates
and increase of twenty three percent. Somebody else says the
food prices only go up. They never come down. Same
for power and rates. No signs of green shoots whatsoever.
Economist government and Hosking are dreaming.
Speaker 3 (08:30):
Yeah, I mean it's not true though, because food prices
do come down. I mean so so much of our
food is based on commodity prices, and right now beef
prices are very high, so beef lam vegetables are up
a lot in the last quarter. I mean it's seasonal.
They will come down. Yeah, And I'm watching butter come
down and cheese will come down again, because we can
(08:52):
see it in the commodity prices that are coming through,
you know, six weeks two months ahead of where it
ends up in the retail. So probably never feels like it.
There's always something, you know, coffee prices or chocolate prices.
Someone else is having a problem with their growing season
somewhere in the world, so that that is an issue.
(09:13):
But I think we will. I think we'll see some
positive stuff there over the coming.
Speaker 2 (09:18):
Now somebody else has conflated a text. I think this
headline inflation number is a nonsense. The inflation experienced by
most of us, who spend most of what we earn
on essentials as well above three percent. New Zealand is
teetering on the edge of stagflation. I would argue, we're
already there, aren't we. Yeah, ask Lee if the New
Zealand economy is now the sausage that has dropped through
the grill.
Speaker 3 (09:39):
I don't know about the sausage analogy, but I agree
about the stagflation. I mean, a simple definition of stagflation
is when you're worrying about your job and price and
the supermarket bill. You know, inflation and rising unemployment and
rising inflation. And we've definitely had a bit of that.
And yeah, I take that point entirely. I think it's
what we were saying earlier that you know, your lived
(10:01):
experience of the cost of living. If you're spending most
of your income to just get by a week to
week and that's going on rent, food power and and
or rates, and you know, you know that that is
going to be clearly higher than the top line inflation rate.
(10:23):
But it's two different things. The Reserve Bank, in terms
of controlling the money supply, needs to know what the
overall amount of inflation in the economy is, and it
has some capacity to look through things that go up
and down a bit like so, you know, petrol prices
up and down a lot, and again they've come down
again in the last week or so, and so you know,
(10:47):
that's probably not going to be causing too much problems
in the in the fourth quarter, so we you know.
So so those things, you know, you live with it.
It goes up and down. The Reserve Bank has to
take a longer term view.
Speaker 2 (11:00):
They will be this will be doctor Anna Bremen's first one,
won't it after after this meeting, then before Smiths she was.
Speaker 3 (11:09):
Touched on just before Christmas anyway, and December one, and she'll.
Speaker 2 (11:13):
Certainly be Surely she'll be looking at what happens next
next month.
Speaker 3 (11:18):
Yeah, yeah, well that they are meeting. I think it's
November twenty so I'm not sure, but it would only
be she wouldn't take a formal role because they're very
vigorous about that sort of stuff. But yeah, maybe certainly
be looking at it closely and hopefully you know, my
hope is that she comes in and we've got a
fairly stable economy and recovery and she doesn't have to
(11:40):
do too much, like maybe if the rates are in
the right place, it might be not moving them at
all next year.
Speaker 2 (11:46):
That'd be nice. Wouldn't it be nice to have a
nice period of boredom around money and money rates? All right,
Liam lovely to talk as always, the New Zealand Herald's
business editor at largely im Dan talking the annual inflation
rates was into a fifteen month I have three percent.
But you know, he keeps saying, Liam, does that the
worst is behind us. Really, it's all in the rearview mirror.
(12:08):
Good times are ahead. You see little e Or bouncing
in like a tigger next year.
Speaker 1 (12:14):
For more from News Talks at b listen live on
air or online, and keep our shows with you wherever
you go with our podcasts on iHeartRadio
You're listening to a podcast from News Talk sed be
follow this and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
As you heard in our news, annual inflation has arisen
to a fifteen month high of three percent. Economists had
been expecting inflation to reach that also pass the three
percent upper limit of the Reserve Banks target band. The
Central Banks expected to look past this current spike when
it reviews the ocr next month. It reckons the economy
(00:37):
has been weak enough to start pushing inflation down. New
Zealand Herald Business Editor at large Liam Dan joins me, Now,
good morning, some late breaking news coming into your phone.
Speaker 3 (00:50):
Your phone ping shouldn't be get near that. It shouldn't
be on. It's okay, but I'm reading the latest news
off it because it's all just coming out. Really yeah,
So look bang on. Expectations not great, but that the
big headline has got to be power prices. So in
terms of driving up inflation, the worst power prices we've
(01:12):
had in this country since March nineteen eighty nine, the
biggest annual increase sorry yeah, yeah, since March nineteen eighty nine,
when there was some I can't really remember, but there
was a bigger Foteste going through at that time, and
that spiked it. So that is pretty is this the
gas again will be that there's actually just short well
(01:34):
it's not all the wholesale price. It's to do with distribution.
I'm not an expert in this very complicated industry, but
you know, like for example, companies like Genesis, the retailers
have said, look, you know they every five years, retailers
(01:55):
pass on the costs that they've been accumulating from increases
from the lines company. So that that was included in
that quarter, I think. But yeah, there was also you know,
the lakes are full now and wholesale power prices have
come down, but they were spiking earlier in the year
and we all felt it right through winter unfortunately, and
(02:17):
so that that was a big one food where we
got food on. You know, food's been up around four
or five percent so and rates have been high as well.
So you know, if you look at they are things
that you just can't avoid rates, and so people feel it,
and they feel more acutely than the three percent because
(02:41):
some of those other things that are keeping keeping it
sort of pushing down the other way. You know, it
can be anything from international travel to you know the
price of getting an accountant or something like that. You know,
things that services and things that we don't necessarily have
to spend on. So if you're just you know and that,
so that affects people who are spending more of their
(03:03):
income to survive and makes it pretty tough. So you know,
that is all horrible, but it's also already happened. So
it's worth remembering that this is the third quarter. We've
already paid these prices, and there are some positive signs.
As economists mentioned, it's bang on the target. The power
(03:24):
prices won't be going up or anything like that. Again,
rents well not not in this current quarter because you
know you're not going to get the lines companies, the
distribution charges and wholesale prices are down a lot. So
you know, I can't can't promise further out or next winter,
but so that'll be promising. Food prices have already started
(03:46):
to come off. Butter's down. Yeah, yeah, I mean that genuinely.
You know, I see it at the supermarket already, butter
not cheese. I got to say, I've watched these things
very closely, so.
Speaker 2 (03:58):
I know these things.
Speaker 3 (03:59):
But butter prices has definitely started to improve, and so
I think from a big macro economic point of view,
this isn't going to change anything for the Reserve Bank.
So we're still going to get another rate cut, possibly
one after that if things are still really bad.
Speaker 2 (04:18):
You don't think they'll go hard before Christ. I mean,
because this drip feeding of the rate cuts means that
everybody just waits. Yeah, and I've got a lot of
employers who are telling me that they are not going
to invest or grow while they've got the fear of
a left block coming in, which means it's going to
be a self fulfilling prophecy if they don't start growing.
Speaker 3 (04:39):
They have to be careful though, because they have, as
we know, a single mandate. It's this government is brought
in which says only inflation is their only only target.
So previously they could have gone, oh, unemployment's looking bad,
we'll factor that in and do a double but they
do have to look at inflation.
Speaker 2 (04:55):
And the two tier economy.
Speaker 3 (04:56):
Yeah, and I mean, you know, I've argued that I
can see the logic for that, but in terms of
timing it hasn't been fantastic for this government. It's almost
I suggested It's almost an own goal because they could
have moved faster with a dual mandate, quite possibly.
Speaker 2 (05:13):
But I suppose they were so busy trying to fix
everything at once with the night, as you've said, with
the Night of the future, and they're not going to
be thanked for that unless things start to improve in
the short term.
Speaker 3 (05:22):
Yeah, I mean, it wasn't it was. It was an
odd one to prioritize it was that in their tax
So I struggled.
Speaker 2 (05:29):
Struggle struggled with they remember those Well.
Speaker 3 (05:32):
No one's going to remember them at the voting booth
next year, and and and it's unfortunately so yeah, look
it'll I guess this is good news in a way
that it's bang on target. The economists have got it right.
Nobody's going to be panicking. The markets are unmoved, so
we've still got the seeds of the recovery starting starting
(05:55):
to roll. I mean, as you say, it is, it
is a very slow process. If people think the rates
are going to be down lower in February, they hold
off even longer. But I wouldn't. I mean, you know,
there's plenty of economists who are warning that you're not
going to see that much more on the mortgage, you know,
the retail mortgage end.
Speaker 2 (06:16):
There's a bit of there's a bit of riggle room
within the different trading links though, isn't there a little?
Speaker 3 (06:21):
They move pretty fast to keep there one year, two
year and six months about the same. Yeah, I guess
you know, people have held off and to me, what
is keeping people from spending is not it's not that
so much the locking and the rates. It's the still
the fear around jobs. And in the next piece of
ugly economic data that we get is going to be
(06:43):
the unemployment numbers.
Speaker 2 (06:45):
You know, I could have done with your column quite frankly,
well that was really that was the sub editors with
the headline the economy is recovering, Brace yourself. There's bad
news coming Liam Dan, Good on you.
Speaker 3 (06:56):
But there is the point of that, though, is that
I think we've got a recovery happening, and you're going
to get but we're going to have, you know, news
about horrible power prices and things. Today, we're going to
get an ugly unemployment number, they're all historic, and then
we're going to get right before Christmas, we're going to
get a GDP number that could say that we were
back in recession. And that's the way it works. The
(07:18):
headlines come later, and we just don't want to let
them disrail derail us in terms of confidence, because you
have to think about what we're in right now, and
hopefully there are some signs that there are some signs
around consumer spending. Some towns are doing better than others.
I was in christ Church in the weekend, better and
better and better. Although I talked to people in christ Church.
(07:42):
I've got friends who were made redundant, you know, from
tech industry and things. And I've got a family member
who runs a small business working with a large number
of other small businesses at B to B accounting type thing,
and they're saying that they've had the toughest year they
can remember in terms of, you know, their clients. And
so even the cities that are supposedly doing well have
(08:04):
had a tough year. So a stretch to say that,
you know, you don't want to assume that it's all Auckland
and Wellington's blues.
Speaker 2 (08:14):
No. Somebody says too that the white cuttle regional rates
and increase of twenty three percent. Somebody else says the
food prices only go up. They never come down. Same
for power and rates. No signs of green shoots whatsoever.
Economist government and Hosking are dreaming.
Speaker 3 (08:30):
Yeah, I mean it's not true though, because food prices
do come down. I mean so so much of our
food is based on commodity prices, and right now beef
prices are very high, so beef lam vegetables are up
a lot in the last quarter. I mean it's seasonal.
They will come down. Yeah, And I'm watching butter come
down and cheese will come down again, because we can
(08:52):
see it in the commodity prices that are coming through,
you know, six weeks two months ahead of where it
ends up in the retail. So probably never feels like it.
There's always something, you know, coffee prices or chocolate prices.
Someone else is having a problem with their growing season
somewhere in the world, so that that is an issue.
(09:13):
But I think we will. I think we'll see some
positive stuff there over the coming.
Speaker 2 (09:18):
Now somebody else has conflated a text. I think this
headline inflation number is a nonsense. The inflation experienced by
most of us, who spend most of what we earn
on essentials as well above three percent. New Zealand is
teetering on the edge of stagflation. I would argue, we're
already there, aren't we. Yeah, ask Lee if the New
Zealand economy is now the sausage that has dropped through
the grill.
Speaker 3 (09:39):
I don't know about the sausage analogy, but I agree
about the stagflation. I mean, a simple definition of stagflation
is when you're worrying about your job and price and
the supermarket bill. You know, inflation and rising unemployment and
rising inflation. And we've definitely had a bit of that.
And yeah, I take that point entirely. I think it's
what we were saying earlier that you know, your lived
(10:01):
experience of the cost of living. If you're spending most
of your income to just get by a week to
week and that's going on rent, food power and and
or rates, and you know, you know that that is
going to be clearly higher than the top line inflation rate.
(10:23):
But it's two different things. The Reserve Bank, in terms
of controlling the money supply, needs to know what the
overall amount of inflation in the economy is, and it
has some capacity to look through things that go up
and down a bit like so, you know, petrol prices
up and down a lot, and again they've come down
again in the last week or so, and so you know,
(10:47):
that's probably not going to be causing too much problems
in the in the fourth quarter, so we you know.
So so those things, you know, you live with it.
It goes up and down. The Reserve Bank has to
take a longer term view.
Speaker 2 (11:00):
They will be this will be doctor Anna Bremen's first one,
won't it after after this meeting, then before Smiths she was.
Speaker 3 (11:09):
Touched on just before Christmas anyway, and December one, and she'll.
Speaker 2 (11:13):
Certainly be Surely she'll be looking at what happens next
next month.
Speaker 3 (11:18):
Yeah, yeah, well that they are meeting. I think it's
November twenty so I'm not sure, but it would only
be she wouldn't take a formal role because they're very
vigorous about that sort of stuff. But yeah, maybe certainly
be looking at it closely and hopefully you know, my
hope is that she comes in and we've got a
fairly stable economy and recovery and she doesn't have to
(11:40):
do too much, like maybe if the rates are in
the right place, it might be not moving them at
all next year.
Speaker 2 (11:46):
That'd be nice. Wouldn't it be nice to have a
nice period of boredom around money and money rates? All right,
Liam lovely to talk as always, the New Zealand Herald's
business editor at largely im Dan talking the annual inflation
rates was into a fifteen month I have three percent.
But you know, he keeps saying, Liam, does that the
worst is behind us. Really, it's all in the rearview mirror.
(12:08):
Good times are ahead. You see little e Or bouncing
in like a tigger next year.
Speaker 1 (12:14):
For more from News Talks at b listen live on
air or online, and keep our shows with you wherever
you go with our podcasts on iHeartRadio
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